Barnett defiant on WA’s burgeoning debt

A defiant West Australian Premier
Colin Barnett
has dismissed criticism from ratings agencies by vowing not to make any cuts to pay for billions of dollars of pre-election promises.

“To build major capital projects, whether they be a hospital or rail line, they do cost a lot of money, they are long-term assets and it’s sensible if you finance them through borrowings," Mr Barnett said on Monday.

“There will be some growth in state debt."

The comments coincided with the release of an annual report by Moody’s, which retained its “negative outlook" on WA’s triple-A credit rating amid concerns expenditure was significantly outpacing revenue growth.

The issue of economic credibility is looming large before the March 9 election, and as opposing parties unveil expensive transport policies.

In a statement, Moody’s said cutting debt was essential for WA to regain its stable outlook.

“The government’s resolve to narrow the deficit and slow the pace of debt accumulation will be key to returning to a stable outlook."

Moody’s retained its negative outlook even though the state has had a recent surge in forecast mining royalty income.

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Moody’s analysts said revenue growth in WA was unable to keep pace with projected expenditure requirements of the rapidly developing state.

Moody’s and Standard and Poor’s placed WA’s rating on watch late last year – indicating the triple-A rating was under threat – when the iron ore price plunged and mining royalty income forecasts were slashed.

Shadow Treasurer
Ben Wyatt
said on Monday that the Liberal government could not simply borrow to pay for its election promises.

“That avenue is no longer available to Western Australia because quite simply, Colin Barnett has maxed out the credit card," Mr Wyatt said.

“At no point has [Mr] Barnett sought to slow the pace of his debt accumulation."

WA Labor has pledged to fully fund its $3.8 billion Metronet transport plan without adding to state debt.

The WA government embarked on freezes and cuts across the public sector when the iron ore price slumped last year, limiting expenditure growth to 2.5 per cent this year. Prior to that expenses were growing at about 10 per cent a year. Moody’s does not expect revenue growth to keep pace with expenditure growth this year.

Economists have mixed views on the management of the Western Australia economy.